A prominent insurance broker whose clients include the NFL and Major League Baseball is rolling out a policy to cover college athletic departments if their athletes are hospitalized for COVID-19.
The insurance potentially covers some 450,000 athletes at more than 1,200 NCAA schools, although it's unknown how many will purchase the policy. Some conferences canceled fall sports, while others are well into the football season.
The policy was delayed for months by behind-the-scenes drama. Alex Fairly, the broker who put together the deal, said one insurer dropped out on the eve of the college football season, citing "reputational risk." Fairly wondered whether the company, a subsidiary of Berkshire Hathaway, was concerned about the political sensitivities around playing sports in a pandemic, but that insurer this week said compliance concerns, not politics, scuttled the deal.
"I was stunned," said Fairly, CEO of The Fairly Group in Amarillo, Texas. "It was the first time in my 25 years that a program which was agreed and bound was nixed 12 hours before it was to go live."
Fairly eventually found another insurer, Berkley Accident & Health. The company is part of commercial insurance giant W.R. Berkley Corp. Another subsidiary, Berkley Entertainment & Sports, provides workers' compensation insurance for NFL teams.
Susan M. Clarke, president of the Special Risk Division for Berkley Accident & Health, told ESPN: "I think we have all learned a lot about ourselves throughout the pandemic, and one of those things is the importance of sports. If we could help colleges mitigate the risk to help decide how to get student-athletes back playing safely, we were all-in."
Athletic directors and conference commissioners interviewed by ESPN expressed interest in the coverage, which many had thought to be unobtainable because of the potential risks. The policy is available only to NCAA-member schools, meaning junior colleges and NAIA athletic programs are excluded. Schools have until Nov. 20 to enroll.
"We are in the process of closely reviewing and evaluating this policy," said Baylor director of athletics Mack Rhoades. "Our intent, nonetheless, is obviously to provide the greatest standard of care and appropriate levels of coverage to all of our 500-plus student-athletes." Fairly said he expected that the policy would be purchased primarily by Division II and Division III schools because they're less able to afford the potential costs of an athlete getting seriously ill from the virus.
Reid Amos, commissioner of the Mountain East Conference, a collection of 12 Division II schools, predicted that if the cost of the insurance is affordable, many of the schools would consider it. The MEC suspended all sports, including football, and hopes to resume next year under a truncated schedule.
According to Fairly, schools will have two insurance options. For $65 per athlete, they can purchase coverage for individual COVID-19-related medical expenses up to $150,000. For $85 per athlete, the coverage increases to $250,000. The policy carries a $5,000 deductible. It includes a death benefit of $10,000.
For Division I schools, which on average support about 500 athletes over several sports, the total cost of the COVID-19 insurance would be at least $32,500.
The COVID-19 coverage arrives amid ongoing challenges to staging sporting events in the middle of a pandemic. Although all the major Division I college football programs are now playing or will be shortly, more than 30 games have been canceled or postponed so far because of the virus. Recently, two SEC games were called off after outbreaks at Vanderbilt and Florida.
Fairly had hoped to launch the policy before the college football season, but he said Berkshire Hathaway's subsidiary suddenly pulled out after weeks of negotiations. The deal fell apart as President Trump publicly encouraged sports to return; the president ultimately took credit for the Big Ten reversing its decision to postpone the season. Meanwhile, former Vice President Joe Biden ran ads blaming the president's pandemic response for empty stadiums at football games.
Berkshire is owned by legendary investor Warren Buffett, who has been critical of Trump and supported Democrats in past presidential elections. Fairly said the last-minute decision "left me asking if the back-and-forth between President Trump and Vice President Biden over college football -- the very thing I was trying to help -- had ultimately killed the deal."
Drew DiGiorgio, president and CEO of Wellfleet Insurance, the subsidiary, said politics had nothing to do with the deal not getting done. He disputed Fairly's characterization that Berkshire Hathaway nixed the plan at the last minute and that the company was concerned about its reputation. DiGiorgio said compliance concerns were the biggest hurdle.
"I never approved a quote to be sold," DiGiorgio said. "I was being pushed for a decision and the decision was no. We got to the 1-yard line, but I never gave final approval."
Fairly said he devised the policy as a solution for schools that could face exorbitant medical costs if their athletes are hospitalized because of the virus.
"Our focus first and foremost is on our clients, and whether anyone agrees or disagrees with them, our clients want to play sports," Fairly said. "We wanted to give them a solution."
But the policy is also rooted in a cold calculus: Insurers have concluded they can profit off the pandemic by taking in more money in premiums than they ultimately pay out in claims for sick college athletes.
Dr. Preeti Malani, the chief health officer at the University of Michigan and a professor specializing in infectious diseases, said offering COVID-19 insurance for college athletes "just feels wrong to me. What kind of message are you sending? If you get sick or you die, this is how much we think you're worth?"
Malani said she felt the coverage was analogous to insurance that people once bought before flying, "thinking the plane might go down. If you need this kind of insurance, it's like you're saying that the safeguards you have in place might not be good enough."
Most schools -- from Division I to junior colleges -- have shut down sports for the fall, affecting hundreds of thousands of athletes across the country. Fairly said some schools that aren't playing in the fall might still buy the insurance to cover athletes who are continuing to practice.
Colleges and universities rely on a combination of their own insurance and the athletes' having primary coverage, often through their families, to cover sports-related injuries. But many athletes do not have insurance, and existing athletic policies do not cover COVID-19.
Medical liability emerged as an urgent concern for many schools in August after the NCAA board of governors issued a series of requirements for member schools intending to play during the pandemic. The NCAA required schools to "cover COVID-19-related medical expenses for student-athletes to prevent out-of-pocket expenses for college athletes and their families."
The mandate was especially problematic for small schools with budgets that would be overwhelmed if athletes were hospitalized, incurring enormous costs. "That was like a nuclear bomb was dropped on a lot of schools that were hoping to play," said Michael McBroom, the athletic director at West Texas A&M University, a Division II school of roughly 10,000 students in Canyon, Texas. "What you had, basically, was the roadblock of all roadblocks for most small schools."
The requirement frustrated many small-college athletic directors, McBroom and others said. The following week, the NCAA issued a clarification stating that "divisions must develop rules providing that member schools will cover COVID-19-related health costs." But the requirement still created enormous risk for schools hoping to play.
The NCAA responded to a request for comment by referring ESPN to the board of governors' clarification.
Fairly said that when he began to explore the possibility of COVID-19 insurance, "the first response was, 'Have you lost your mind? We're in the middle of a pandemic. We're not providing coverage.'"
He said he then began an actuarial analysis to determine whether the coverage could be made cost-effective. He noted that the hospitalization rates for college-age students are dramatically lower than for older people with confirmed cases. As of Oct. 10, the hospitalization rate for people 18-29 was 83.1 per 100,000 cases, according to the Centers for Disease Control and Prevention. For people 50 to 64, it was 280.7 per 100,000 cases.
"My counterargument was, 'This is the healthiest group of humans who could get this,'" Fairly said.
He calculated that even if a team or school suffered a significant outbreak, costs would remain low to insurers because few, if any, athletes would be hospitalized.
"This is one of those scenarios of when you see a fire coming toward your house, how can you get fire insurance?" said Dixon Gillis, CEO of A-G Administrators, a sports accident insurance company that works with about 450 college athletic departments. "When you see a tsunami coming up to the resort, how do you get flood insurance? Alex has single-handedly come up with this arrangement where in the middle of a pandemic, you have coverage for a communicable disease."
ESPN researcher John Mastroberardino contributed to this report.